The Option Alpha Podcast

We're joined by Adam Cohn, Vice President and Head of Trading Operations at TradeStation, an award-winning trading platform known for its comprehensive trading tools, advanced charting capabilities, and extensive market analysis features. 

Adam brings a wealth of experience, not just from his role at TradeStation but also from his extensive background in options trading in the Chicago pits and as a market maker. His deep understanding of market structure and dedication to best execution have made him a trusted figure in the industry. 

In our conversation with Adam, we discuss trading operations, market structures, and the complexities of order execution. You’ll learn about order routing and execution, what factors determine fills, payment for order flow (PFOF), the role of market makers, and so much more. 

This episode is a must-listen for options traders looking for a deeper understanding of trading options!

See the full show notes here

Show Notes: https://optionalpha.com/show232

Navigating options expiration is a critical skill for traders, especially with the rise of daily expirations.

This week’s podcast explores the top 7 automated tips and tricks you can use inside Option Alpha to set up your portfolio for better options expiration management.

See all 7 tips here

1. Adjust exit options as you near expiration
2. Check the extrinsic value of your positions/legs
3. Check the probability of short legs being ITM
4. Don’t use market orders, use defined limit orders
5. Tag positions for their state so you can analyze performance later
6. Setup alerts for low liquidity exit conditions
7. Setup ‘critical’ alerts for positions between strikes of a spread

Show Notes: https://optionalpha.com/show231

This week we explore the latest and most pressing challenges emerging for investors who have embraced autotrading.

As automation revolutionizes the financial markets, traders find themselves navigating uncharted psychological territory. From trusting bots and algorithms, coping with reduced decision-making control, and the novel complexities of autotrading that demand a new style of adaptation and resilience.

With help from our team, I’ll peel back the proverbial onion on the evolving mindset of options traders and shed some light on these new psychological challenges popping up.

See the full list here

1. Obsessive-Compulsive Overriding (OCO)
2. Strategy Straitjacketing
3. Current Events Fallacy
4. Sweeping Conclusion Anxiety
5. Shiny Object Syndrome Freeze
6. Bot Scapegoating
7. Feature Creep
8. Emotional Hedging
9. Version Control Disorder
10. Identity Panic Disorder

Show Notes: https://optionalpha.com/show230

This week I explore a deep and philosophical viewpoint into the world of automated trading and its inevitable rise for investors. I explore the evolutionary nature of human decision-making and its limitations in complex financial markets by examining cognitive biases and their impact on manual trading.

I’ll also discuss the technological advancements driving this shift, risk management in autotrading, and the future trends and challenges in this rapidly evolving landscape. Get ready for a fresh perspective on the future of investing and why autotrading is poised to dominate.

These are my 9 key takeaways

AI is the hot new buzzword these days, sparked by the release of ChatGPT a few months ago. Since then, it seems everyone has used OpenAI’s software in fascinating (and sometimes scary) ways.

So, I jumped into ChatGPT and asked it to come up with the top questions that new and advanced traders ask about options trading.  This week's podcast explores the 15 questions - and answers - that options trades want to know.

See all 15 answers here

1. What are options and how do they work?
2. How much money do I need to get started in options trading?
3. How do I select the best options trading strategy?
4. What are the key components of an options contract?
5. What is the difference between a call option and a put option?
6. What is the difference between buying and selling an option?
7. How do I determine the strike price for an options contract?
8. What is implied volatility and how does it impact options trading?
9. What are the risks involved in options trading?
10. What are the different options trading strategies I can use?
11. How do I calculate profit and loss for an options trade?
12. How do I manage risk in my options trading portfolio?
13. Should I use technical analysis to inform my options trading decisions?
14. Can you use charts and graphs to trades options?
15. What are some common mistakes to avoid when trading options?

How long does it take a stock to get back to even after a large daily move down? And does the magnitude impact how long it takes the position to recover the loss?

We’ve all been in losing trades and wondered if we should hang on to the position for a little longer or cut it loose. So, to help answer the question, we studied the short-term performance of stocks and ETFs after different daily loss totals.

The study analyzed 324 assets over a 20-year period. We calculated the 5-day returns following single-day losses up to 5%.

See the full research report here.

Stocks have been described as a rubber band, and we often assume they will snap back and revert when prices become overextended.

So, we wanted to know: How likely is a security to continue or reverse its momentum above and below major moving averages in short, medium, and long-term timeframes? And does the security’s proximity to a moving average impact its performance?

We researched 20 years of data on 286 symbols, using short, mid, and long-term trends to analyze the ticker’s 30-day return relative to its simple moving averages.

I'll be honest, the results surprised me.

Click here to see the full research report.

"The trend is your friend." It’s a popular saying amongst traders, and we hear it all the time. But is there validity in the statement?

We backtested directional option selling strategies with a long-term trend filter to see if there is a significant impact on performance.

We used Option Alpha's backtester to review the data for  SPY, GLD, and TLT short put spreads and short call spreads. Short put spread tests included a filter to only enter trades above the 200-day moving average. Short call spread variants included a filter to only enter trades below the 200-day moving average.

Click here to see the full backtest results.

Important Note: This podcast is for educational purposes only. Past performance does not guarantee future results. This data is presented objectively and is not financial advice or a suggestion to use these strategies. We encourage you to always do your due diligence and test your strategies.

Let's take a closer look at the performance of these strategies using different trend filters. This is a great baseline when considering how to set up your trades, and we hope this inspires you to backtest your ideas for strategy optimization.

This week we take a look at the performance of the Monthly Iron Condors ($3k Portfolio) bot template. You might recall that we previously did a deep dive on this template back on Show 214, walking through the strategy setup, the scanner and monitor automation setups, etc. But now that we’ve had it running for a little over a year, we thought it would be help to take a look at how it has weathered this year’s market volatility and explore possible ways to adjust or improve its performance in the future.

So, let's dive in and look at how this strategy has performed in this year's volatility and explore possible adjustments and future improvements. Ultimately, if nothing else, we hope this example helps give you some ideas to help with your own trading.

Show Notes: https://optionalpha.com/show224

Option spreads are a simple and flexible, yet powerful strategy for traders. And while spread strategies come in many forms, shapes, structures, and durations, some core elements are present in spread trading generally that new traders should pay attention to. On this week's show, we'll once again slow things down a bit and focus on understanding what option spreads are and how to trade spreads in your portfolio.